Supply Chain Challenges: The Rebirth of Manufacturing in the U.S.
It’s hardly breaking news that the last 18 months have brought significant challenges to supply chain issues, and by extension to manufacturing. So where do we stand now, and what does the future hold?
The Current State of U.S. Manufacturing
August brought a somewhat unexpected bump in manufacturing activity, as the Institute for Supply Management (ISM) index of factory activity was up slightly to 59.9 (from 59.5 in July). A reading over 50 indicates expansion. Forecasts had the index falling to the mid-58 range, so this was something of a surprise.
What’s not surprising is that U.S. manufacturing continues to be hampered by persistent problems in procuring raw materials as supply chains struggle to recover from the pandemic. Equally persistent are the issues in hiring enough qualified personnel, as domestic factory employment dipped to a nine-month low. That may ease as extended Federal unemployment benefits expire in September.
There’s plenty of demand as businesses seek to replenish stocks in the second half of the year, and the supply issues vary from sector to sector, but clearly there’s still some headroom as manufacturing recovers from the pandemic.
The Near Future of Manufacturing
The pandemic exposed America’s vulnerability to supply chain weaknesses, so there’s a good bit of demand to rectify that situation. If you’re not familiar with the term ‘reshoring,’ you will be soon. More than simply bringing manufacturing processes back from overseas, reshoring also involves expanding existing operations and seeking new domestic sources of raw materials, and even direct foreign investment in U.S. manufacturing.
With all those variables, an accurate estimate of reshoring activity is more or less impossible. One survey, however, said that 83% of industrial buyers intended to find and place 10 to 12 percent more orders with domestic suppliers this year. That doesn’t sound like a lot, but it would translate to a new injection of $443 billion to the U.S. economy (Source: Supply Chain Management Review).
A local case in point here is the recent announcement that US Wind will bring 500 manufacturing jobs to the former Bethlehem Steel facility in Sparrows Point. This production is based around the MarWin offshore wind project, which will place 22 wind turbines in an area 17 miles off Maryland’s coast by 2025. While the project itself carries a good deal of controversy, the return of local manufacturing at that scale is very promising.
Down the Road
Beyond the shift from overseas to domestic production, manufacturing continues to evolve, and it seems everyone has a crystal ball and some predictions to offer.
A report from Gartner highlighting trends in manufacturing for 2021 points to new opportunities for manufacturers to monetize the large amounts of data generated by the digitalization of operations. Gartner further notes the emergence of Equipment as a Service (EaaS). Much as software has transformed from a boxed product to a cloud-based, on-demand service, businesses can now pay for operational assets through recurring charges instead of purchasing equipment outright. It’s easy to see the appeal in that model.
Further, in many cases manufacturers are now able to close the loop on how their products are used in ways that were previously impossible. Just as the transition of software to the cloud allows engineers to see exactly how users engage with their products, the telematics built into items ranging from cars to washing machines give manufacturers new sources of data to mine. That direct user feedback leads to more efficient products and better outcomes for the user.
Looking perhaps even further into the future, a Forbes article points to the decline of ownership as an overall societal trend. Put another way, trends point to more ‘usership’ and less ownership, and to the desire of consumers to accumulate fewer belongings. This could take any number of forms, but the article suggests that manufacturers will begin to need considering consumption – product use – as a central metric instead of product sales.
That particular view of the crystal ball will be a while coming into focus, but the combination of technology and the reshoring trend point to a bright near-term future for U.S. manufacturing.